Posts about free

Too bad David Carr didn’t walk down the hall at the Times to ask someone to remind him of the disaster that was TimesSelect before he penned today’s column wishing for, praying for, fantasizing about an iTunes for news content that finally gets them—those damned readers—to pay for our words again. TimesSelect tried that and it didn’t work when the paper learned that—notwithstanding what Carr’s echo-chamber expert tells him—free is a business model (and charging money costs money). Music isn’t ad-supported, news is.

But the real fallacy in Carr’s delusion is that a news story or an opinion, like a song, is unique—that you can’t get it somewhere else and so you have to buy the original. If I can’t get Allentown, the original, I’m not likely to settle for a cover. But if I can’t get Carr’s column about wishing for micropayments, believe me, I can go elsewhere and find plenty more columns and blogposts just like it. And even if Carr had a unique idea here, the essence of it—without guitar accompaniment—can spread without having to hear him sing the tune. Information isn’t art. Neither are opinions.

And, by the way, I think Carr is quite unfair to Michael Hirschorn’s Atlantic column about a different future for The New York Times. Hirschorn did not say that, in Carr’s summary, “tweets, blogs and stripped-down news aggregators could fill the gap in reporting…” He was trying to find a new model for supporting the core reporting of The New York Times – a model that wouldn’t require begging and empty dreams.

I’m writing a chunk of my book now about one of my favorite topics: how much I despise real-estate agents and how eagerly I await the doom of their business model. And it so happens that Saul Hansell just wrote a blog post about Zillow and its effort to open up the mortgage market by providing information while protecting customers from spam. There’s this nice quote at the end from founder Rich Barton:

The Internet is a great big race to free. Anyone who has built a business model with a price above free for something that can be free is in a tough strategic position.

Competitive advantage is fundamentally about making markets work less efficiently. One catastrophically effective way to do that is to hide and obscure information – to gain bargaining power relative to the guy on the other side of the table.

Once a marketing gimmick, free has emerged as a full-fledged economy. Offering free music proved successful for Radiohead, Trent Reznor of Nine Inch Nails, and a swarm of other bands on MySpace that grasped the audience-building merits of zero. The fastest-growing parts of the gaming industry are ad-supported casual games online and free-to-try massively multiplayer online games. Virtually everything Google does is free to consumers, from Gmail to Picasa to GOOG-411.

The rise of “freeconomics” is being driven by the underlying technologies that power the Web. Just as Moore’s law dictates that a unit of processing power halves in price every 18 months, the price of bandwidth and storage is dropping even faster. Which is to say, the trend lines that determine the cost of doing business online all point the same way: to zero.

Curmudgeonly contrarian Nick Carr picks his head up and comes to the defense of TimeSelect — after it is dead and buried — but misses some obvious economic realities. Carr quotes a Financial Times columnist who quotes a University of Chicago study (warning: a PDF filled with formulae) that points to the Washington Post and argues that the paper and its online site were not complementary but competitive and so the Post should have tried (as the Times did) to get money out of its online audience while the getting was good.

But this ignores the essential economic fact here that newspapers are no longer monopolies. With the internet, they gained new competitors the world around and lost the pricing power that their monopoly over production and distribution gave them. So it’s foolish to judge the Post or Times in isolation as if they could demand and get money from consumers who can now go to plenty of other sources.

Carr et al also ignore the economic reality of Google and the link becoming the new means of media distribution. If you hide your stuff, it cannot be found. And so long as you are hidden, your competitors will grab that distribution and marketshare from you.

In periods of fundamental technological change & discontinuity, leaving money on the table may well be a smart strategy. . . . Sam Walton (whose descendants collectively are now the richest people in the world) pointedly refused to price the goods at the “going rate”, which a Harvard Business School prof of that time would have considered stupid. So Times would have been better off if they had recognized it at that time. At least they are smart enough to recognize it now. . . .

BTW, in late 80’s, Larry Ellison, nobody’s fool as a businessman, enunciated it thusly: in early markets, maximize marketshare, not profits. NY Times should have become *the* go-to place for news & views online. They always had the breadth & depth of content. The fact that they let a whole lot of other sources jump ahead speaks volumes of their failure of vision.

Carr thinks the Times left money on the table by taking down the wall. I think they burned money by putting it up. And once again, nowhere have I seen a decent financial analysis of the cost of TimesSelect: the cost of marketing to acquire subscribers and cope with churn, the cost of customer service, the cost of ad revenue lost, the cost of traffic lost to other sections and advertising lost there as a result. Clearly, the Times made that analysis and tore down the wall.

Matthew Ingram also rebuts the study Carr so dearly wishes to rely upon, first quoting the its conclusion regarding the Post: “Removing the [news website] from the market entirely would increase readership of [the newspaper] by 27,000 readers per day, or 1.5 per cent.” To which Matthew responds:

He therefore concludes that the Post has lost $5.5-million in newspaper revenue as a result of providing its news online for free. Does that make any sense? It might to an economist, but I would argue his thesis fails the reasonability test. If the washingtonpost.com website were to disappear or be locked behind a pay wall tomorrow, does anyone really think that 27,000 people would suddenly go out and start reading the paper edition?

Gentzkow clearly does. I think they would be more likely to just go elsewhere for their news, such as Google News or Yahoo News or MSNBC or CNN. It might be tempting — and make for a much simpler business case — to argue that a product like the Post competes primarily with its own website, and vice versa, but I don’t think that is the way things work.

Rob Hyndman also points out to Carr and company that lots of the people formerly known as readers like using the internet and wouldn’t it be foolish for a newspaper such as the Post or the Times to push them to competitors by putting up a pay wall?

Note finally Alex Patriquin’s analysis at Compete.com of NY Times op-ed audience since they took down that wall: “…[T]he Opinion section has more than doubled unique visitors, while the overall NYTimes.com site has grown by roughly 10% in the same period.”

Carr accuses of me being a member of the free-content hallelujah chorus who, he says, “take as a personal affront any attempt to charge for ‘content’ online.”

But Carr misinterprets me and projects a motive on me that is not there. I’m not saying necessarily that I want content to be free; hell, I’m a writer for a living and if I could be paid for my writing — and paid more than I am — I’d be delighted.

Instead, I am saying that content is free and companies like the New York Times and writers like me (and my students) as well as Carr had damned well better figure out how to work with that essential economic reality. Wishing that you could charge as if you were still a monopoly protected by the size of the gas tank of your nearest competitor’s trucks is foolhardy and dangerous. Carr’s analysis is as wistful as it is incomplete, sloppy, and hazardous.

And — this is what blows Carr’s mind — one response to this new networked economic reality is to view other media sources — your paper, the other guy’s news web site, your writing readers’ blogs — not as competitors but as complementary sources that enable you to do what you do best (and get the maximum value you can for that via advertising) and link to the rest (saving you the expense of inefficiency that news media still carries from its legacy today). One response to competition everywhere is to open up to collaboration, enabling you to identify and exploit your greatest value in a new economic reality.

I’ve heard both arguments from inside Dow Jones about keeping the Journal behind a pay wall or freeing it to the world, but now comes no less a WSJ luminary than Kara Swisher voting for free from her (free) blog:

While I hate to differ with Crovitz, who helped us immeasurably in getting this site up and running as a free one, I think an open and ad-supported model is the only way to go now, especially under a larger and more powerful (and, most important, global) company like News Corp. that can really vault the site to higher prominence and higher traffic.

And given that the Journal’s online site garners estimated revenues of about $65 million from its paid efforts, which is admirable, it is chump change for News Corp. to try turbocharging the site as a free one, an experiment that will surely pay back the short-term cost. . . .

Most importantly, while a good product, the paid version simply creates a situation in which the Journal is not as relevant as it could and should be.

Scott Moore — a competitor, it should be noted — from Yahoo chimes in in the comments:

‘m not so sure “go free” is the right move for wsj.com at this point. I always felt they made a strategic mistake in launching the site with a subscription for many of the reasons Kara states about influence, size of audience, etc. At this point, however, its not at all clear that making the site free would automatically get it to the top of the Financial sites ratings without a big distribution partner (oh wait, there’s MySpace). And NewsCorp will have to weigh the potential damage to newspaper subscriptions and DJ wire service business if wsj.com goes free as is. Will be v interesting for sure, but its not a simple decision.

Heh. You can bet that Moore doesn’t want WSJ to go free; it would be a body slam to Yahoo News, which mostly merely aggregates while the Journal reports. Nice try, Scott.

Oh, I’m so tired of the ages-old argument that we are all thieves because we don’t pay for content.

My friend Mark Potts trots out the meme once more. The standard arguments are there:

Why would publishers give something away online that they charge for in print? Why leave money on the table?

And…

In fact, several publishers are doing very well charging for content on the Web, even as the majority of their brethren avoid it like the plague. Exhibit A: The Wall Street Journal. . .

And…

But that quality content is expensive to create, folks. You should be paying for it, even if you don’t want to. That’s just not a good enough reason. There’s no constitutional right to freeload. The First Amendment guarantees a free press–not a “free” press.

This argument makes it seem as if it’s our fault that we’re not paying. Shame on us. Well, I don’t buy it. For neither is there a constitutional right to avoid the essential economics of media and change. The arguments not given in this plea:

First, this is a post-scarcity media economy. Most news is a commodity. And that which isn’t faces no end of competition. OK, so I can get the Wall Street Journal only because I pay. And, yes, it’s good. But there is plenty of other media coverage of business out there, covering mostly the same news. And I don’t have an expense account anymore. So I’ll find plenty that is good enough. If your content is not free, you have to compete with free, and that’s damned hard. Ask every classified manager who’s competing with Craig’s List.

Second, charging consumers cannot come without marketing. Subscriber acquisition costs are high; just ask any magazine publisher (or AOL, for that matter). In the back-of-the-envelope calculations on the value of the very limited number of paid services, I never see lines for acquisition costs and churn.

In addition, the value in media is — and always has been — the relationship, not the sale of the physical product (the manufacture of which also brings considerable cost not included in these envelope-calculations). If you cut off that relationship, you diminish your value — just ask those Times columnists trapped behind their wall — and cede that value to your many new competitors. Indeed, if you are really smart, you’ll realize that our “consumption” of that “free” “content” — our remixing and tagging and linking and recommending and correcting and behavioral-data-making — adds value. But you have to be quick enough to capture it.

Who cares whether content wants to be free? It already is. Deal with it.

: Mark comments and emails and says I’m being unfair; he’s not criticizing readers, he says, but publishers, for leaving money on the table. We still do disagree about that. I criticize publishers for still whining about circ revenue and not figuring out the ways to go with the flow and find their cash flow in new ways.